Cloth Imports Are Our Cash Cow - URA

Audio 2

The hope for a reversal  of the government decision to raise taxes on the textile and garment imports lies in how the Uganda Revenue Authority will advise the Ministry of Finance, Planning and Economic Development.

The government increased the customs tax on textile materials from 25 to 35 per cent or3 US Dollars per kilogram, whichever is higher, for the financial year that started July 1, 2021. The Tax on finished garments was also increased to 35 per cent or  3.5  US Dollars per kilogram, whichever is higher.

The new measures are aimed at discouraging the importation of clothes because the local industry is increasingly building production capacity. This will therefore help the government protect the textile manufacturing industry and also save more than 500 million US Dollars that the the country spends on importing clothes annually.

But as implementation started, it drew an outcry as the reality of it donned on the traders. Tumusiime Ivan, a resident of Kampala applauded the move as positive for the local industry. “If you look at it in the sense of promoting local designers and the Ugandan textile industry, it's a positive note,” he said.

But others are worried that the capacity in the country to meet the demand is still low, and this will lead to an increase in the prices of all products, imported or local, which will have a negative effect like smuggling.  Another customer, identifying himself as Bamulangaki, said that although the policy is good, it cannot be implemented in a rush because Uganda does not have the capacity to meet the country's garment industry at the moment.

Opposition party Forum for Democratic Change-FDC sparked off the anger when it called for the revision of the tax as soon as possible. "This means a pair of jeans which has been paying 7,769 Shillings in tax will now be paying 27,114 shillings. This is another way the government is squeezing traders out of business. This tax must be revised,” the party argued.

Most of the new tax policies relating to industry were based on the provisions of the National Development Plan III, which stresses industrialization for import substitution and export promotion.

The garment import business is also heavily dominated by the used garments trade, which accounts for between 150 and 200 million dollars a year.

URA Commissioner for customs, Abel Kagumire says that their duty as URA is to implement government policy, and where they encounter negative effects or challenges to collection and management of a tax, they advise the government. He encouraged those who are affected by the tax, especially the traders, to seek an audience with the responsible ministries.  

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On whether the traders’ complaints of imports which are already on the high seas, the URA says they have not yet got any reports. Last year, when related increments were made on the textile and garment imports, the traders petitioned the government through parliament, and Finance Minister Matia Kasaija directed URA to clear orders which had already been made before the new taxes, on the old rates. 

Some URA officials show that it is highly unlikely that they will advise the government to reverse the tax measures. 

They argue that if the local textile market is strengthened, it will also help revive the cotton industry which was once a leading income generating activity for farmers. But on his part, the Assistant Commissioner Field Services Asadu Kigozi says the textile industry of one of the most lucrative sources of revenue from the customs department. 

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